Willard L. Golightly, a principal with WFG Investments, Inc., was permanently barred from association with a Financial Industry Regulatory Authority (FINRA) member firm in all principal capacities and barred from associating with a FINRA firm in all capacities for three months after consenting to findings that Golightly had failed to properly supervise sales practices of a registered representative who had engaged in unsuitable trading in his customers’ advisory and brokerage accounts. Letter of Acceptance, Waiver, and Consent No. 2013038132001 (Sept. 16, 2015).
According to the AWC, Golightly and registered representative, MB, both were employed with WFG as well as a registered investment advisor firm. The AWC indicated that WFG permitted MB to engage in private securities transactions through the registered investment advisor, but with the expectation that Golightly would be monitoring MB’s transactions with both firms.
The AWC indicated that between January 1, 2012 through June 20, 2013, MB had engaged in a large amount of trading in securities which were deemed low priced (under $5) in customers’ accounts. FINRA found that MB had, in an unsuitable fashion, concentrated his clients’ accounts in the low priced securities (MB’s advisory purchases in the low priced securities amounted to eighty percent in 2013). The AWC noted that the majority of the clients had eighty percent of their money invested in the low priced securities, and/or highly speculative and illiquid private placement securities, as well as real estate investment trusts. MB, according to the AWC, had concentrated the clients’ positions without any regard for the clients’ risk tolerance, financial circumstances, and investment objectives.
The AWC stated that during the relevant period, Golightly had been aware of several warning signs that should have prompted him to take action with MB as a result of the unsuitable trading. Golightly, aware of MB’s concentrated trading, never determined how severe MB’s violations of sales practices were or whether customers had consented to such activity. In another instance according to the AWC, Golightly failed to enforce restrictions eventually placed on MB’s trading activity by WFG when the firm became aware of MB’s activity, enabling MB to further purchase unsuitable positions in client accounts via WFG and the registered investment advisor.
The AWC indicated that Golightly even failed to follow WFG’s instructions to contact clients that had large positions in the securities which MB had purchased to mitigate (by limiting or eliminating) purchases of the securities for both the clients of the firm and the registered investment advisor. The AWC further noted that in May of 2013, Golightly failed to respond to a client who complained about the unsuitable positions that MB purchased for the client which resulted in losses.
FINRA stated that Golightly failed to reasonably maintain his firm’s written supervisory procedures associated with reviewing client accounts for over concentrated positions, and ensuring positions were suitable considering clients’ needs, investment objectives, risk tolerance, etc. FINRA found Golightly’s conduct to be in violation of FNRA Rule 2010, NASD Rules 3010(a) and (b), and 3040(c)(2).
FINRA, via NASD Rule 3010(a), requires that firms and supervisory personnel establish and maintain a supervisory system that is reasonably designed to achieve compliance with applicable securities laws and regulations. Additionally, Rule 3010(b) requires that firms establish, maintain and enforce written procedures to supervise their business and registered representatives that are reasonably designed to achieve compliance with applicable securities laws.
Public disclosure records via FINRA’s BrokerCheck reveal that Golightly has been subject to twelve disclosures, three of which involved an employment separation after allegations of misconduct. In June 20, 2013, Golightly was terminated (via discharge) from WFG after failing to report a customer complaint. On October 1, 2013, Securities America, Inc., allowed Golightly to resign after the firm alleged Golightly to have participated in private securities transactions in violation of the firm’s policies. On January 28, 2014, Golightly was permitted to resign from SCF Securities.
Public records also reveal that Golightly has been subject to a slew of customer disputes. On September 12, 2013, Golightly became subject to a pending customer dispute where customers requested $5,000.00 after alleging that Golightly participated in guaranteeing against loss and deceptive SLS practices. On January 14, 2014, Golightly settled a customer dispute for $21,750.00 after the claimant alleged failure to supervise, unsuitable recommendations, and breach of fiduciary duty. On July 2, 2014, Golightly provided a client with $194,000.00 in damages after the claimant alleged unsuitable sales and breach of fiduciary duty.
Between July 21, 2014 – April 27, 2015, Golightly became subject to five pending customer disputes where customers are requesting $1,825,000.00 in the aggregate, where one or more customers alleged that the registered representative recommended unsuitable investments in penny stocks and private placements, engaged in unauthorized trading, misrepresentation and omissions of material facts, fraud, negligence, breach of fiduciary duty, breach of contract, and violations of state securities laws.
Securities brokerage firms have a duty to supervise their brokers and the sales practices of their brokers, and to review customer statements for, among other things, evidence of suitability, unauthorized trading, or excessive activity.
Prior to the recommendation of any security, the broker must first understand the risk and characteristics of the securities being recommended, and whether that security is suitable for any customer. The second step, in connection with the recommendation to recommend a particular investment or investment strategy is whether the transaction is suitable for that particular customer.
A representative’s knowing recommendation of an unsuitable security not excused by the customer’s belief that security was suitable. Suitability is distinct from disclosure. A stockbroker has an obligation not to recommend to a course of action even if all risks are fully disclosed to a customer whose financial and physical condition made the recommendations unsuitable.
The violation of these rules supports a claim for securities fraud. FINRA’s suitability rules, and the former suitability rules of the New York Stock Exchange and the NASD, have long been regarded as the standard to which all brokers are held. As at least one Court has held, the violation of these rules is tantamount to fraud.
Guiliano Law Group
If you have been the victim of securities fraud and you have a complaint, you should consult with an attorney. The practice of Nicholas J. Guiliano, Esq., and The Guiliano Law Group, P.C., is limited to the representation of investors in claims for fraud in connection with the sale of securities, the sale or recommendation of excessively risky or unsuitable securities, breach of fiduciary duty, and the failure to supervise. We accept representation on a contingent fee basis, meaning there is no cost unless we make a recovery for you, and there is never any charge for a consultation or an evaluation of your claim. For more information contact us at (877) SEC-ATTY.
